While most of us know the importance of saving money, we may not know how to save for unexpected moments in life. To do this, you should consider building an emergency fund, which can be used to cover expenses for unfortunate circumstances that can't be easily predicted. What do such circumstances entail? Are there others that are deemed less appropriate? Here is how you should, and shouldn't, use emergency funds, as detailed by Robert Jain.
When it comes to the best purposes of emergency funds, medical emergencies should be discussed. Whether it's a broken arm, a flu shot, or what have you, it goes without saying that you'll have to pay a certain amount for each visit to the doctor. If you lack insurance, costs can rack up, so it makes perfect sense to use the savings you've accumulated in your emergency fund. This is just one of the multiple uses supported by authorities on finance, Bob Jain included.
Another reason to use an emergency fund is in case of an auto accident or mechanical difficulty. Even with insurance, you don't want to have to deal with the headache that comes with repairs from a body shop. Furthermore, if your car is perfectly fine but suddenly starts to break down, you'll have to pay as well. In situations like these, it makes perfect sense to build your emergency account ahead of time. The earlier that you do so, the better off you'll be.
Now let's discuss a few ways that an emergency fund shouldn't be used, starting with luxuries. For example, if you're planning on taking a vacation within the year, you shouldn't dip into your account that's used for emergencies. This goes back to the unpredictability associated with them. One must stay focused on their priorities, after all. If the vacation in question remains a goal, slowly save your money over time. Eventually, you'll have enough to justify the expense.
Additionally, emergency funds aren't to be used in conjunction with student loan payments. To say that student loans are important would be an understatement, and while they can be difficult to pay off, your emergency fund shouldn't be put at risk. This is where the saving of money, from week to week, comes into play. Any savings that you build during this course of time should be used to pay your loans. There are other purposes that your emergency savings can be used for.
When it comes to the best purposes of emergency funds, medical emergencies should be discussed. Whether it's a broken arm, a flu shot, or what have you, it goes without saying that you'll have to pay a certain amount for each visit to the doctor. If you lack insurance, costs can rack up, so it makes perfect sense to use the savings you've accumulated in your emergency fund. This is just one of the multiple uses supported by authorities on finance, Bob Jain included.
Another reason to use an emergency fund is in case of an auto accident or mechanical difficulty. Even with insurance, you don't want to have to deal with the headache that comes with repairs from a body shop. Furthermore, if your car is perfectly fine but suddenly starts to break down, you'll have to pay as well. In situations like these, it makes perfect sense to build your emergency account ahead of time. The earlier that you do so, the better off you'll be.
Now let's discuss a few ways that an emergency fund shouldn't be used, starting with luxuries. For example, if you're planning on taking a vacation within the year, you shouldn't dip into your account that's used for emergencies. This goes back to the unpredictability associated with them. One must stay focused on their priorities, after all. If the vacation in question remains a goal, slowly save your money over time. Eventually, you'll have enough to justify the expense.
Additionally, emergency funds aren't to be used in conjunction with student loan payments. To say that student loans are important would be an understatement, and while they can be difficult to pay off, your emergency fund shouldn't be put at risk. This is where the saving of money, from week to week, comes into play. Any savings that you build during this course of time should be used to pay your loans. There are other purposes that your emergency savings can be used for.
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